With only a handful of large employers and Maryland’s highest poverty rate, Somerset County has come up empty for years in its efforts to attract a natural gas pipeline, which county officials view as the key to unlocking its economic potential.
Now, though, a pipeline is just a few regulatory steps away from construction in the county. What changed? Not the private sector. The county’s economic activity is as sluggish as ever. What’s new is a lucrative public lifeline — a 20-year contract to supply natural gas-fired energy to two huge state-owned enterprises: a historically Black university and a state prison.
The state’s financial interests in the Del-Mar Energy Pathway pipeline top the list of questions being raised by environmental groups about the Eastern Shore project.
“I don’t think driving down the utility bills at a state penitentiary is a compelling enough benefit to put my family at risk or to put at risk the waters that my grandfather tonged oysters in,” Robin Cockey, an attorney and former Salisbury city councilman, said at a recent hearing on the pipeline.
The project also has drawn scrutiny for potential environmental damage to wetlands and streams during construction, the possibility of the pipeline leaking and its reliance on gas obtained from controversial hydraulic fracturing.
The project aims to bury a 10-inch pipe from near downtown Salisbury in Wicomico County southward to the community of Eden just beyond the Somerset boundary; the second phase will continue south with an 8-inch pipe past Princess Anne, where it will serve the University of Maryland Eastern Shore, and onward to the Eastern Correctional Institution in Westover. Most of the work will take place in the existing right-of-way along Route 13 and a rail line — which, the project’s advocates say, should reduce harm to the environment.
“I’d love to be able to see a future where we have energy that is produced that doesn’t harm or kill people,” said Josh Hastings, a Wicomico County Council member. “I do not want a future with more chemical inundation on our society.”
The nearly 19-mile conduit will be the first natural gas link in Somerset County, one of only three Maryland counties that lack access to the fuel source. Smaller branches will eventually carry gas to hundreds, if not thousands, of homes and businesses along the route, including in the county seat of Princess Anne.
“We need this for economic growth. It’s just hard to compete with counites that have natural gas, because they can offer their companies a much cheaper product to run their business,” said Randy Laird, a representative on the Board of County Commissioners.
A deal beneficial to both sides?
Eastern Shore Natural Gas, a subsidiary of Delaware-based Chesapeake Utilities, won approval for the project last December from the Federal Energy Regulatory Commission. Decisions loom in the coming months on two key governmental authorizations: a pair of wetlands-disturbance licenses from the Maryland Department of the Environment and a franchise agreement from the Maryland Public Service Commission. The company hopes to have gas flowing to the two Somerset facilities by late 2021.
For ESNG, however, the project comes amid gathering storm clouds in the industry. In July, Dominion Energy and Duke Energy announced the cancellation of the Atlantic Coast Pipeline, which had been proposed to run 600 miles through West Virginia, Virginia and North Carolina. The two energy giants cited its increasingly shaky financial prospects and a spider’s web of legal challenges thrown up in their path.
In another huge setback for the industry, North Carolina’s environmental regulator denied a water-quality certification for the expansion of the Mountain Valley Pipeline. Other major pipeline projects across the country have faced similar legal and economic blows. And Chesapeake Energy Corp., an Oklahoma-based oil and gas producer not affiliated with Chesapeake Utilities, recently filed for bankruptcy.
Dean Holden, Chesapeake Utilities’ manager of business development and sales, said he doesn’t foresee those headwinds affecting the Del-Mar pipeline. “We find the footprints we are in and adjacent to are consistently asking for expansion,” he said.
For their part, Somerset leaders have been asking for nearly two decades. The lack of natural gas access smothers the county’s growth, said Danny Thompson, executive director of the Somerset County Economic Development Commission.
He pointed to the case of one company, with several locations over a broad geographic area, that canceled plans to invest $4 million and hire up to 10 new employees at its Somerset site because of its high energy costs. If that company, which Thompson declined to identify, could replace its propane and fuel oil system with natural gas, it would save about $600,000 a year, he said.
Although some energy companies had shown interest in the rural county over the years, Thompson said, “we never could really get to that tipping point.” Now, with the prison and university guaranteed as customers, he added, “the business model is there to make this work.”
ESNG officials argue that natural gas represents a far-cheaper energy option for the institutions. For more than 30 years, the correctional institution has gotten the lion’s share of its electricity from a wood-fired boiler. The university has been relying on fuel oil. The pipeline company estimates that commercial and industrial customers that switch from heating oil to natural gas typically save more than $12,000 a year.
The promise of savings has partly fueled the state’s pursuit of natural gas for its Somerset County institutions. In August 2019, the Maryland Energy Administration and the Maryland Environmental Service signed a contract with Chesapeake Utilities to convert both to natural gas. The Environmental Service is the independent state agency that oversees the heating and electrical systems at both facilities.
Although Environmental Service officials reached out to multiple vendors, Chesapeake Utilities was the sole bidder on the contract.
The proposed pipeline received another boost in July this year when the Maryland Board of Public Works unanimously approved paying contractors more than $500,000 to prepare the heating system at the correctional facility for the conversion. The board’s three members are Gov. Larry Hogan, Comptroller Peter Franchot and State Treasurer Nancy Kopp.
“The project will spur regional economic development, creating jobs while bringing lower energy prices to the residents and businesses on the Eastern Shore,” Hogan said. “We’ve been working very diligently to expand their alternative energy options, and there is immense support for this project.”
The pipeline needed to carry natural gas to the prison hasn’t been fully permitted by the state, critics point out. Environmentalists and a trade group representing a competing energy source charge that the Board of Public Works vote puts undue pressure on the MDE to give its blessing to two wetlands permits.
One permit, which is closer to approval, pertains to the Salisbury-to-Eden portion of the pipeline. If approved, the nearly 7 miles of construction would temporarily disrupt about 200 linear feet of streams and 16,000 square feet of wetlands.
The second applies to the 11 miles of pipeline needed in Somerset County. That segment will cross beneath three water bodies: the Manokin River, Taylor Branch and Kings Creek. A virtual public information hearing is scheduled for Sept. 17 on that license request.
“Should MDE be permitted to deliberate on this critically important permit when two other intertwined state agencies have a vested interest in the outcome?” asked Ellen Valentino, a representative of two energy trade groups, in written comments to the MDE.
“It’s definitely a cart-before-the-horse [situation],” said Anthony Field, Maryland campaign coordinator for the Chesapeake Climate Action Network.
Jay Apperson, MDE’s spokesman, rejected the notion that the Maryland Environmental Services contract or Board of Public Works action ties regulators’ hands. The agency will analyze the permits and make recommendations to the Board of Public Works, which has the final say.
If the pipeline doesn’t go forward, the state can cancel its contract with Chesapeake Utilities, said Tim Ford, who heads the projects division for the Environmental Service.
Pipeline advocates contend that the conversion will make the state greener, reducing carbon dioxide emissions 65% at the prison and 38% at the university. That has about the same impact as removing more than 11,000 cars from the road, according to ESNG’s calculations.
Pipeline extensions across the country, though, have come under fire for extending “fracked” gas to new markets — and the Del-Mar project is no exception. Under Hogan, Maryland has banned the controversial gas-harvesting technique within its borders. Environmentalists say it’s hypocritical of the state to continue expanding access to natural gas.
“It defies our state’s existing energy policy to bring the same public health risks to our residents by way of pipelines,” a coalition of more than 30 environmental groups told the administration in a jointly signed letter recently. “We are appalled that the request for proposals put out by the state of Maryland to repower the university and prison foreclosed the possibility of clean energy by only requesting applications for fracked gas.”
During their vote on the engineering contracts, Kopp and Franchot asked Hogan and his administration to investigate whether the pipeline can be barred from transporting gas from fracked sources. “I’m sure the PSC [Public Service Commission] will take a look,” Hogan replied.
Chesapeake Utilities’ Dean Holden said the company offers customers an option of subscribing to certain types of natural gas, including renewable sources. As part of the Somerset extension, Chesapeake Utilities plans to link its pipeline network to a bio-refinery that will transform poultry manure into enough electricity to power up to 10,000 homes. CleanBay Renewables expects to begin construction on the plant later this year.
Environmentalists are also at odds with the pipeline company over the safety of natural gas pipelines. During the MDE’s virtual hearing on the Wicomico wetlands permit, a company engineer repeatedly assured critics that the risks to the environment and the public are low.
Leaks wouldn’t contaminate the soil or groundwater because methane, natural gas’ central ingredient, is lighter than air and would drift away, said Mark Parker, ESNG’s engineering manager. Regarding accidents, he pointed out that the company has been operating hundreds of miles of pipeline since the 1950s with no reported “failures.”
“I cannot speak to a forever scenario for you where nothing will ever happen,” Parker told listeners. But “our [safety] procedures are federally mandated. We take them seriously.”